This short article, “Get Ready for the Refi Bubble to Burst,” from American Banker highlights news pertaining to the home lending industry, and warns mortgage bankers to brace themselves.
As interest rates inevitably rise, refinance volumes in the industry will drop by up to 75%. Cornerstone Home Lending, Inc. is uniquely positioned to weather this storm. Here are some important facts about Cornerstone:- In 2012, Cornerstone’s purchase business accounted for approximately 60% of our total loan volume; a stark contrast to the industry average where purchase loans were less than 20% of total volume.
- In March 2013, purchase applications rose to 70% of our total loan volume, making it the best month in Cornerstone history.
- Over the past 25 years, Cornerstone has survived and thrived through three major periods when refinances dropped significantly.
- For the states we lend in, refinances are projected to drop to 18-20% of our total business. Due to our comparatively low refinance volume, our refinance activity will decline much less than the 75% prediction for the industry.
- When the “end of refinances” prediction is realized, Cornerstone should only have to make up about 10-12% of last year’s business (approximately $450-$500 million) to keep pace with our 2012 total volume.
- Competitors focused more on refinances will suffer tremendously due to the projected 75% drop in refinances.
- Refinance-heavy companies cannot shift to a purchase-oriented business overnight. It takes years to develop and capture referral account relationships with Realtors, Builders and other professional referral partners.
It is important to work with a mortgage lender that is prepared for this next season in the home lending industry. Cornerstone’s business model is sound, and we expect our business to thrive, even during the coming downturn.
I hope you have found this information helpful and encouraging. Make it a great weekend!